What’s Next For The Dolphins

The Miami Dolphins are licking their wounds coming off a stinging defeat in Tallahassee after seeking public money for their Sun Life Stadium renovation project.

Before suggesting what they should do next, it’s important to understand how we got here.

Steve Ross, one of the most successful real estate entrepreneurs in America (net worth in excess of $4 billion dollars) wanted to own a sports franchise.

Wayne Huizenga, then owner of the Dolphins, and also one of America’s great entrepreneurs, knew this. Much like a car salesman sensing how badly you want the new car on the lot, Huizenga held firm and Ross paid 20-25% more for the Dolphins and Sun Life Stadium ($1.1 Billion) than they were worth at the time. In other words, he didn’t make a good deal.

They don’t call it the Billionaire Boys Club for nothing.

Ross soon realized what Huizenga already knew. While profitable, owning a pro sports franchise is unlike anything in the private sector. The public scrutiny, the challenge of building a successful on-field product, and the parity driven nature of the NFL can often make ownership a challenging, difficult, draining and frustrating experience.

Led by Mike Dee, Ross assembled a very talented upper management team on the business side. All had extensive experience in one important area, getting public money for stadium/arena construction.

From 1991-2006, over $16 billion of public funds have gone into stadium and arena construction. The economy collapsing in 2007 stemmed this financial tidal wave. One notable exception was the nearly $360 million in public dollars that went toward Lucas Oil Stadium in Indianapolis in 2008.

Then, Jeffrey Loria came along.

Unfortunately for Ross and the Dolphins, Loria resides in his backyard and was a former tenant at Sun Life Stadium. Loria received over $600 million dollars in public funds to build Marlins Park. He then proceeded to create the sports version of a Ponzi Scheme that would have made noted South Florida Ponzi Schemers Scott Rothstein and Nevin Shapiro proud. Loria built up his payroll to impress lawmakers and fans to get public dollars. Midway through his first season in Marlins Park, he began dismantling the team. He finished the roster purge in the off-season.

What followed was the greatest fan revolt I’ve seen in the nearly 30 years I’ve lived in South Florida. The Marlins are now a shell of a franchise. The public is out over $600 Million Dollars, and Jeffrey Loria is the most despised owner in sports.

This is the backdrop for Steve Ross and the Miami Dolphins to be “next up” seeking public money.

As Rodney Dangerfield used to say, “You think it’s easy”?

The Dolphins mounted the usual campaign. They stated the need for tourist driven events to fill hotel rooms (often called “heads and beds”) and create jobs. They explained how it wouldn’t cost taxpayers any money. They talked about the need for renovating Sun Life to field a winning team, attract the Super Bowl and other events. Let’s dissect these points.

Heads and Beds. In South Florida, hotel occupancy in Dade County exceeds 95% from January 1 to February 10. Why is this relevant? It falls within the window of the two biggest carrots the Dolphins dangled at the citizens of South Florida for public dollars. The Super Bowl and the newly created College Football championship game.

In short, the Dolphins wanted over $180 Milllion in public money to fill an additional 5% of Dade County hotel rooms once every 5-8 years when these events would take place. If they are successful in the bid process, of course.

For the record, there are no guarantees a community is awarded big events in a renovated/new stadium or arena. For example, the Marlins had TWO all-star games taken away from them by Major League Baseball. The Miami Heat, one of the most successful franchises in pro sports, have never hosted an NBA All-Star Game at American Airlines Arena.

While I believe it’s likely South Florida would get a Super Bowl with a renovated Sun Life Stadium, even the most rabid pro-public money stadium supporter would admit the cost doesn’t justify filling the 5% of unoccupied hotel rooms once every 5-8 years.

The Dolphins have floated the number of 4,000 new jobs created by a renovated Sun Life Stadium. Simply put, this is a fallacy. No stadium in the history of American sports has created this many jobs. It’s voodoo economics at its finest. Frankly, the powers that be with the Dolphins know better. This argument needs to be taken off the table going forward. It can easily be debunked.

No cost to taxpayers. Pro-stadium supporters often look to use hotel bed taxes and/or rental car taxes in an attempt to receive public dollars. The argument is simple. “We aren’t taxing you, the taxpayers. We are taxing tourists”.

As is often the case, the devil is in the details. While not DIRECTLY taxing residents, an increase in hotel and rental car taxes DOES directly impact them.

Miami is in a very competitive convention/special events marketplace with cities like New York, Chicago, New Orleans and Las Vegas. As hotel and rental car taxes increase, Miami falls behind in a competitive marketplace for year-round events. That affects residents who hold jobs in the hospitality/service sectors. That’s a failed long term strategy for any community. Especially a community so dependent on tourism such as Miami.

Amidst this backstop, the Dolphins forged ahead and, unfortunately for them, failed in their attempt to secure public funding. The question now is, where do they go from here?

When teams fail to secure public funding, two strategies usually emerge. First, an owner/team attacks politicians. Second, they make noises about moving. The Dolphins employed both strategies. One directly. One in a subtle fashion.

Directly, Ross has discussed wanting to “fix” Tallahassee. Translation: He has to figure out a better way to work with lawmakers to secure public funding.

In subtle fashion, Mike Dee has put moving on the table. By saying, “The Dolphins won’t move as long as Steve Ross owns them”, he is trying to build public support for Ross while simultaneously planting the seed they have no control over the future of the franchise if Ross decides to sell. That’s from the Scare Tactic 101 Handbook.

Much like the claim of creating 4,000 new jobs, the Dolphins need to eliminate any talk of moving. The franchise isn’t going anywhere and everyone knows it. That “threat” isn’t going to get them public money. In fact, it will insure they never get it.

The simple solution is for Ross to pay for the entire renovation himself. However, it’s not that simple for one reason. The NFL doesn’t want Ross to do so. Why? Once an owner pays for the entire costs of renovations, the days of public-private partnerships are over. Roger Goodell would rather party with Sean Payton than ever establish that precedent.

So, where do the Dolphins to from here? They need to work with the NFL to add more league money to the renovation costs. The NFL has dollars set aside strictly for this purpose.

While it may not be optimal for the NFL to contribute more to the project than they wish, it’s better than the alternative: Ross footing the entire bill himself.

At the same time, Ross needs to build better relationships in Tallahassee. While challenging, it’s certainly something a man possessing the charm and people skills can pull off.

Unlike the Marlins situation, I believe Steve Ross and Mike Dee are good people and want to be good citizens. In retrospect, they badly miscalculated the amount of community angst present for public funding for sports facilities at this time.

Use the upcoming year, lobby the facts, eliminate the scare tactics, and present a clear and FAIR proposal for all involved. If they do so, I believe by this time next year they will have a deal in place to renovate Sun Life Stadium.

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